INTERNATIONAL TRADE EXPLAINED
Source: Steve Clifford
Q. Does International Trade benefit the United States?
A. International trade benefits everyone.
Q. How?
A. Let’s look at Finland. Finland makes excellent cell phones. Then they sell their phones to other countries and buy what those countries make best, TV’s from Japan, textiles from China, tin from Brazil, and taxi drivers from Uzbekistan.
Q. So every country produces the products they make best and free trade allows everyone to get the best of everything?
A. Exactly. We get the best from each country. Furs from Russia, sherry from Spain and oil from Saudi Arabia.
Q. What does the United States sell to other countries? What product do we make best?
A. Debt.
Q. So other countries sell us oil, TV's, sherry, and cab drivers, and we sell them debt?
A. Right. Last year we sold $150 billion of debt to China alone.
Q. Couldn’t the Chinese manufacture their own debt?
A. They could, but they are not very good at it. They fare much better by selling us their great textiles and then buying our superbly crafted debt.
Q. Why do we make the best debt?
A. The quick answer is productivity. Our debt productivity is the highest in the world. Last year we ran a trade deficit of $666 billion. That’s $6000 for each household in the U.S.
Q. Is that good?
A. That is great productivity. Look at the French, who are trying to compete with us in debt production. Their trade deficit was a paltry $109 per household. The debt productivity of the U.S. is fifty-five times that of France.
Q. Is that because the French work only 35 hours a week, take long vacations, and are saddled with social welfare policies that sap individual initiative?
A. Yes, and they also waste time with their families when they could be producing debt.
Q. What explains the United States’ extraordinary debt productivity?
A. Culture, technology and government.
Q. Culture?
A. We make the best debt in the world because we have a culture that allows debt to flourish. Debt is second nature to us. We invented home equity loans, auto loans, and variable rate mortgages. Financial obligations – debts, mortgages, auto payments now consume one fifth of household income in the U.S. And the average credit card debt of U.S. households is about $10,000.
Q. Sounds like France and China don’t have a chance!
A. Not with our technological edge. Other countries are still using old fashioned mortgages while we are pioneering with space-age debt technologies such as interest only strips on pass-through securities based upon pools of collateralized mortgage obligations. We are the country that invented off-balance sheet debt financing. We’re the home of Enron!
Q. So our trading partners recognize our technological lead?
A. No, they whine about unfair trade practices.
Q. What is their complaint?
A. They claim that “Stumble, Fumble and Borrow” is protectionist, giving our domestic debt industry an unfair advantage.
Q. Is “Stumble, Fumble and Borrow” a law firm?
A. No. “Stumble, Fumble and Borrow” is the current administration’s approach to any issue. Hurricane Katrina? Stumble, Fumble and Borrow. Iraq? Stumble, Fumble and Borrow. Energy? Transportation? Health Care? Farm Programs? Stumble Fumble and Borrow.
This year the administration will receive over $150 billion of supplemental appropriations for war, counter-terrorism and disaster relief – all appropriated outside of the normal budget process and all financed by debt.
Q. Why can’t other countries compete with “Stumble, Fumble & Borrow”?
A. Because in the last two years, “Stumble, Fumble & Borrow” has added $742 billion to our federal debt. Our level of debt, $72,000 per household, provides economies of scale that give our domestic debt industry an unbeatable advantage.
Q. That’s great, but how will we pay it all off?
A. Pay it off? Our expertise is debt manufacturing and marketing. We don’t have much experience in paying it off. We can’t compete with the Swiss, the Danes and the Dutch when it comes to paying off debt.
Wednesday, June 21, 2006
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